Is Now The Right Time To Buy GEA Group Aktiengesellschaft (FRA:G1A)?

GEA Group Aktiengesellschaft (FRA:G1A) is considered a high growth stock. However its last closing price of €29.19 left investors wondering whether this growth has already been factored into the share price. Let’s look into this by assessing G1A's expected growth over the next few years. Check out our latest analysis for GEA Group

What can we expect from GEA Group in the future?

If you are bullish about GEA Group's growth potential then you are certainly not alone. Expectations from 24 analysts are extremely bullish with earnings forecasted to rise significantly from today's level of €1.036 to €2.113 over the next three years. On average, this leads to a growth rate of 15.85% each year, which signals a market-beating outlook in the upcoming years.

Is G1A's share price justifiable by its earnings growth?

G1A is available at a PE (price-to-earnings) ratio of 28.17x today, which tells us the stock is overvalued based on current earnings compared to the machinery industry average of 21.23x , and overvalued compared to the DE market average ratio of 18.04x . This multiple is a median of profitable companies of 25 Machinery companies in DE including STS Group, STS Group and AS Ditton Pievadkezu Rupnica.

After looking at G1A's value based on current earnings, we can see it seems overvalued relative to other companies in the industry. But, to properly examine the value of a high-growth stock such as GEA Group, we must reflect its earnings growth into the valuation. I find that the PEG ratio is simple yet effective for this exercise. A PE ratio of 28.17x and expected year-on-year earnings growth of 15.85% give GEA Group a higher PEG ratio of 1.78x. So, when we include the growth factor in our analysis, GEA Group appears a bit overvalued , based on its fundamentals.

What this means for you:

G1A's current overvaluation could signal a potential selling opportunity to reduce your exposure to the stock, or it you're a potential investor, now may not be the right time to buy. However, basing your investment decision off one metric alone is certainly not sufficient. There are many things I have not taken into account in this article and the PEG ratio is very one-dimensional. If you have not done so already, I highly recommend you to complete your research by taking a look at the following:

1. Financial Health: Is G1A’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
2. Past Track Record: Has G1A been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of G1A's historicals for more clarity.
3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com

Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.